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The Government has quietly shelved Hindustan Copper Ltd's (HCL) follow-on offer (FPO) plan. According to top Union Ministry of Mines officials, the FPO, which was earlier taken off from the 2010-11 disinvestment lists, has not been included in the 2011-12 schedules.
Sources in the Government said, this was a “decision” by default, as the Government explicitly had not so far communicated this to the HCL board, which has two Mines Ministry representatives.
Mr Shakeel Ahmed, CMD of HCL told Business Line : “I can only repeat the official position, which is that the Department of Disinvestment (DoD) is yet to decide on the timeline of the FPO. HCL does not have any further comment to offer.”
Mr Ahmed, however, confirmed that the DoD in late January had informed that the scheduled divestment of HCL was put off to March 31. Incidentally, the 2011-12 Budget speech by the Union Finance Minister was silent on HCL's disinvestment.
Lower Offer price
Sources in the Ministry said that in December 2010, the Empowered Group of Ministers (EGoM), which included the Finance Minister, did not favour proceeding with the HCL's FPO as merchant bankers recommended substantially lower offer price than then ruling market price of HCL stock.
“Had the Government accepted the recommendation, it could have paved way for discomfiture. More importantly, the profit and internal cash generation of HCL during this year improved significantly owing to operational restructuring as well as higher LME prices, which in turn raised hopes that the integrated public sector copper producer could do without equity fund raising now,” a senior Mines Ministry official explained.
Of HCL's Rs 472-crore equity, 99.5 per cent is currently held by the Government. Post-FPO, which included 10 per cent (of the present equity) disinvestment, the Government's stake would have been reduced to 18 per cent.
The proceeds of fresh issue of shares (around 10 per cent of the present equity) — the other part of the FPO — were meant to fund its expansion plans. The Government hoped to raise Rs 4,000 crore plus.
The Rs 5 HCL's stock finished at Rs 302 on Friday. Its 52-week high is Rs 567 and the year-low is Rs 230 (recorded on February 11 this year).
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